What's the issue with Company pension contributions?

[Hiram King Of Tyre]

I can't see why is should be a problem. After all, paying money into a pension isn't avoiding tax, it's deferring tax

[mashetti]

Interesting... I am in the process of setting up a Personal Stakeholder Pension through my limited. I have been told by the bods at the bank (one of those really big banks with 4 a 4 letter name) that the limit is 100% of salary, mine this year being a measly 5k. Basically what is being said here is that there is no such limit, just a bit of talk around 100% to confuse everything. My bank are wrong and I am about to trust them with some hard earned dosh!

I'm glab that the 'deferred' tax thing was mentioned as I didn't think this far down the line. I have always been thinking that I am 20% (ish) better off but that is only true if when I retire I pay myself the then new 0% limit, otherwise I will be almost in no better position. Am I missing something here?

[mashetti]

ok, so I read that you get 25% lump sum tax free so that's a start.

[VectraMan]

I'm glab that the 'deferred' tax thing was mentioned as I didn't think this far down the line. I have always been thinking that I am 20% (ish) better off but that is only true if when I retire I pay myself the then new 0% limit, otherwise I will be almost in no better position. Am I missing something here?

I was thinking that given the upper rate tax on dividends is 23% ish and you'd pay roughly that when you finally take the money out of a pension, you're no better off and may as well pay it as divs now and invest the money yourself.

But I hadn't thought you could reduce your CT liability - I think that's what you're missing too. Am I right?

Do you pay NI on the pension you receive?

[Hiram King Of Tyre]

Isn't the tax rate on upper tax band divies about 25% + the 20% corporation tax paid before the divie is made?

[mashetti]

I was thinking put in pension now saves 20(ish)% CT now but then down the line you pay tax on it when you get it out of pension. I wasn't considering the tax on divs as I only ever go up to the lower limit so no more tax to pay. I guess it's different if you go into the higher band then you are paying 40(ish)% now when you could stick in pension and pay 20(ish)% later (have to use nice round 20% 40% figures otherwise gets too hard to be correct!). You do get a 25% tax free lump sum but not sure about NI. I think some you do pay NI, others it's taken care of but as I don't pay NI I dont give a rat's...

[Hiram King Of Tyre]

OIC....

That doesn't give you much to play with though below the 40% threshold. My concern really was avoiding paying 40% tax but still doing something smart with the money. Hence it’s above the 40% threshold that I’m interested in.

[bellymonster]

I'm thinking of looking at a SIPP (Self Invested Personal Pension). Not decided if I'll do it yet but Hargreaves Lansdowne have a good reputation and sent me lots of info about it, certainly worth a read.

I have been trading shares for quite a few years now so it doesn't frighten me too much, plus your not giving your hard earned dosh to some fund manager who could knows little more than you.

The way I see it is, if some big company fritters my pension fund I'm gonna be mighty pizzed off, whereas if I do it I've got noone else to blame but myself.

[Hex]

If you want a SIPP for holding shares I reckon www.SIPPDeal.co.uk are better value than Hargreaves Landsdown. HL are better for Unit Trusts and things which pay them trailing commission.

[ittony]

Who cares about pension when there it is BTL ?

Ha haaaaaa ha ha ha ha ha ha ha ha ha ha ha ha. Ahhhh. Good one!